Agencies plan spending spree to implement Wall Street reform bill

Federal agencies will likely spend billions of dollars more each year carrying out Obama’s sweeping overhaul of financial regulations.

Across Washington, regulators and the White House are planning for bigger budgets and new power to write hundreds of new regulations designed to prevent or mitigate the effects of future financial meltdowns.

Congress is on track to appropriate hundreds of millions more in 2011 for the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), Federal Trade Commission (FTC) and Treasury Department. Lawmakers are still working on the annual spending bills.

“It basically was a car sitting in a showroom. We’re putting the fuel in the tank,” said Sen. Dick Durbin (D-Ill.), referring to the financial overhaul effort and the money to fund it. Durbin is chairman of the Senate subcommittee that oversees spending on financial agencies. 

Congress paid for the financial overhaul by cutting short the 2008 financial bailout package and increasing the amount of money banks pay into a deposit insurance fund.

“Obviously this is going to take a tremendous amount of resources to implement,” said Tom Quaadman, vice president at the U.S. Chamber of Commerce’s center on capital markets. “No one has a sure grasp on what is needed to do that.”

For the SEC, lawmakers plan to boost funding next year by roughly $200 million, or nearly 20 percent. The commission expects to hire 800 employees to write or enforce scores of new regulations and studies on executive compensation, shareholder power and other hot-button parts of the overhaul.

The CFTC, which has wide-ranging new powers over the $600 trillion market for financial derivatives, is set to receive another $120 million from Congress, a 70 percent boost. Under House plans the CFTC will receive a boost, but less than the Senate wants.

Senators are planning to give roughly $20 million more to the FTC for new employees targeting financial fraud and data security.

And House and Senate lawmakers are planning to give tens of millions of dollars more to Treasury for new economists and experts on financial markets. Key financial market offices at the department had a total of only 40 employees on the eve of the financial crisis. The department will also play a central role on a council of regulators to oversee financial risks and the insurance industry and compile information on financial markets.

“Overall in the current crisis, the cost of the regulation is a bargin compared to the cost of regulatory failure,” said Travis Plunkett of the Consumer Federation of America. 

The spending bills don’t account for some of the largest changes in the financial overhaul package.
A centerpiece of the bill is a new Consumer Financial Protection Bureau to write and enforce rules over much of the home loan and credit card industries and other parts of the financial sector. 

The new bureau will pool some resources from existing regulators and will likely add plenty of new employees. The Treasury Department and federal regulators met on Thursday to officially begin the process of consolidating different responsibilities and planning for the new bureau. 

The Cambridge Winter Center, a nonprofit that advocated for the agency, estimated that the bureau would have more than 2,000 employees, nearly two-thirds of whom would be new hires.

The bureau’s budget was a contentious issue during the legislative debate, as Democrats and consumer advocates sought to ensure its independence. Though the bureau is housed at the Federal Reserve, lawmakers mandated that it have a budget of at least 10 percent of the Fed’s, or roughly $400 million, in 2011. Under the law, the budget would increase to 11 percent in 2012 and 12 percent the year after.

The Fed and Federal Deposit Insurance Corporation (FDIC), two of the most powerful overseers of the industry, are financed through assessments and other methods, rather than congressional appropriations. Both gain major new powers under the bill, while losing some to the consumer bureau. They have yet to say how their budgets will be affected.

Meanwhile, the legislation would merge the Office of the Comptroller of the Currency (OCC) and Office of Thrift Supervision (OTS), two parts of the Treasury Department. It is unclear how the merger will affect the overall budget.